Shepard Davidson

If Someone Has a Right to Match Your Offer, Put Your Best Foot Forward Right Away

In A Right to Match Can Provide Multiple Benefits, I discussed some subtle ways to create value through the use of a right to match or a right of first refusal. A recent decision by Justice Robert Ullmann of the Massachusetts Superior Court highlights some additional features of rights to match that are far from intuitive and could either be used to your benefit or be a trap for the unwary.

In Serrano v. Serrano, Dennis Serrano had the right of first refusal to purchase property owned by the Marina Trust. In March of 2014, the trustee of that Trust offered the property for sale, and Bremis Realty, Inc. offered to purchase the property for $2.2 million and agreed to put up a $5,000 deposit. After Serrano was notified of the offer, he timely informed the trustee that he was exercising his right of first refusal, and tendered a check in the amount of $5,000, confirming that he genuinely was matching the Bremis Realty offer. When Bremis Realty learned that Serranno had exercised his right to match, it made an enhanced offer that included, among other things, an expedited closing date and additional pre-payments.

When the Trust sought to accept the enhanced Bremis Realty offer, Serrano sued, claiming that he had matched Bremis Realty’s offer and had a right to buy the Trust property. The Trust argued that because Serrano did not match Bremis Realty’s enhanced offer, Serrano waived any tentative right he might previously have had to buy the property. Ultimately, Judge Ullmann ruled that:

It does not matter if Bremis Realty, Inc.… is now willing to make advance payments and expedite the closing. Plaintiff has demonstrated a reasonable likelihood of success by timely exercising his right to first refusal and matching the terms of the third-party offer that was communicated to him.

While Judge Ullmann does not say so expressly, it appears that his underlying reasoning was that when Serrano matched Bremis Realty’s initial offer, a contract was formed for the purchase and sale of the real estate. As such, Bremis Realty’s enhanced offer was irrelevant because, by then, the Trust was bound to sell the property to Serrano.

This case provides two takeaways for in-house counsel. First, if you are in the position of trying to make a deal where another party has a right of right refusal, you should consider making your best offer initially, as opposed to starting low in the hope of negotiating a better price. If you don’t, you risk losing the deal to the holder of the right to match without ever being able to make your best offer. Second, if you are the seller, you want to make sure that potential buyers know that if they try to lowball you and you accept, they still may lose out because the third party holding the right to match may exercise that right. In either case, understanding how rights to match work can have a big impact on getting a deal done at the best price.

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Shepard Davidson

Shepard Davidson

Editor

sdavidson@burnslev.com Shep is a partner in and former Co-Chair of the Business Litigation practice at Burns & Levinson, as well as a current member of the firm's Executive Committee. Shep concentrates his practice in the areas of complex business torts, contract claims, real estate disputes, and employment disputes.

Kelly Kirby

Kelly Kirby

Contributor

kkirby@burnslev.comKelly Kirby is an associate in Burns & Levinson’s Litigation Group. She maintains broad experience practicing before state and federal courts in various jurisdictions, including trial, pre-trial settlement negotiation, mediation, and arbitration. She is adept at preparing litigation plans that provide clients with optimal go-forward strategies and an understanding of the risks and rewards involved with their case. Kelly most enjoys communicating these strategies to her clients, believing that a clear plan diminishes some of the unpredictability associated with litigation.

Gregory Paonessa

Gregory Paonessa

Contributor

gpaonessa@burnslev.comGreg Paonessa is an associate in Burns & Levinson’s Litigation Group. He focuses on risk management and assessment to aid clients in resolving disputes efficiently and economically, and with an eye towards potential impacts on their businesses in the short and long term. His experience growing up as part of a family business provides Greg with unique insights and understanding of the client’s point of view. Although his practice has focused on resolving claims against design professionals, his education and experience in business is always a guiding factor when he advises clients.